African gold miners liked by Investec: Randgold favourite

Broker Investec expects the gold price to rally in the short-term and suggests Randgold Resources and several other African gold miners is the way to take advantage.
The broker believes macroeconomic conditions remain supportive for gold and forecasts the price to average US$1,750/oz in the first half of 2013, increasing to US$1,800/oz in the second half and into 2014.
This bodes well for all gold equities, suggests the broker, which appear to have re-established their historical relationship with the bullion price. Longer term, earnings assumptions reflect a gold price trend back to US$1,400/oz.
Randgold Resources and Amara Mining (LON:AMA) are Investec’s preferred choices. Aureus Mining in Liberia looks inexpensive, it adds, and while there is also good potential at African Barrick (LON:ABG), Avocet (LON:AVM) and Centamin the risks are higher.
Randgold (LON:RRS) looks good value following its share price decline from recent highs of 7800p, which reflects political risk in Mali, where most of RRS’s current production is based.
The reality is that operations remain unaffected and by all current indications are likely to remain so, says Investec.
Recent news flow has been mixed, with ongoing good progress at the Kibali project offset by niggling production issues at the other operations, including a fire at the Tongan plant in Ivory Coast.
Political risk in Mali remains an issue, although foreign intervention appears to have improved this, while operations there have not been affected.
Randgold is the highest valued of the gold companies the broker looked at, but it sees no reason for this to change, barring seizure of the Malian operations, something it considers to be highly unlikely.
The share price should improve with the gold price, while the rating reflects Randgold’s superior production growth, higher grade profiles and greater operational diversity.
Aureus Mining (LON:AUE) has completed a feasibility study at its New Liberty mine in Liberia. The project is a high grade open pit mine, which would establish the country’s first commercial gold mine and provide a stepping stone from which to potentially develop other targets in its portfolio.
New Liberty is expected to produce around 115,000 ounces per annum of gold at US$685/oz over an 8.5-year mine life.
An optimisation update announced yesterday on the process plant indicated much improved leach times and lower cyanide consumption, which should reduce operating costs.
Detail on the cost implications of these improvements is expected toward the end of this quarter. Exploration work at regional targets should also continue to provide news flow.
Centamin (LON:CEY), meanwhile, has been upgraded to a 'buy'. The group had a very good year operationally in 2012, exceeding the production target of 250,000 ounces set at the start of the year.
The exposure to Egypt and the associated political risks, real or otherwise may overshadow the progress on production, but the deep value Investec sees sparked the upgrade to 'buy'.

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